- The Washington Times - Monday, November 3, 2003

President Bush, like President Reagan before him, will begin his re-election campaign next year with a strong economic recovery that will make the chances of defeating him a steeper climb for the Democrats, economic analystssaid over the weekend.

“I think the White House and Republican strategists should expect this economy is going to be a political asset for them, not a liability,” said economist Kevin Hassett at the American Enterprise Institute.

After the Commerce Department released its economic numbers for the third quarter Thursday, showing that the economy was growing at a robust annual rate of 7.2 percent, Mr. Hassett said he ran the government’s data through his statistical forecasting models. What they showed was that the U.S. economy will likely grow by at least 4 percent between now and next year’s election.

“I found, basically, that it’s very easy to see employment growth in the fourth quarter of about half-a-million jobs, based on the third-quarter gross domestic product numbers and the history between strong GDP and job creation,” said Mr. Hassett, former senior economist at the Federal Reserve Board.

Over the next 12 months, he sees the economy producing between 150,000 and 200,000 jobs per month. “Two million jobs is not unusual over one year, especially a good year,” he said.

Treasury Secretary John W. Snow has made similar forecasts about the jobs picture.

The 7.2 percent growth rate in the July-September period was the fastest pace since the first three months of 1984 when Mr. Reagan was gearing up his re-election campaign for a second term.

At this point in Mr. Reagan’s first term, the economy was coming out of the worst recession since the Great Depression, though showing signs of increased strength. His critics had doubted that his tax cuts would work and ridiculed his policies as “Reaganomics.”

But as the economy’s GDP rose, unemployment slowly began to decline and Mr. Reagan went on to win another term in a 49-state landslide against former Vice President Walter Mondale who ran on raising income taxes — just as some of the Democratic presidential front-runners are doing now.

“The Reagan parallel is interesting because the [2001-2002] recession wasn’t that deep. It was shallow, except for business investment. Generally, after big declines, you have big increases and that’s what we’re likely to see now,” Mr. Hassett said.

Democrats reacted to the third-quarter-growth numbers by questioning whether that level of growth can continue. But the consensus among Wall Street economists is that, while growth over the next three months won’t be as strong, the economy is entering a period of stronger expansion over the next 12 months at least.

But as important as GDP growth is, administration policy-makers know that it won’t count for much in an election year if the economy isn’t producing jobs.

Unemployment now stands at 6.1 percent. But over the past month the weekly jobless-benefits claims have been steadily declining, a sign that the job market is stabilizing and businesses have begun hiring again to meet rising consumer demand and replenish falling inventories. More than 57,000 new jobs were created in September.

Administration officials and many outside economists believe that when the unemployment figures for October are announced Friday, they will show a further net increase in jobs.

“As production increases and the economy is growing at 4 percent or better, you will see an increase in employment,” said Craig Garthwaite, research director at the Employment Policies Institute.

“One of the numbers behind the GDP growth rate that was particularly good was the dramatic increase in business investment, and that is having a very important effect on the economy. It’s a sign of the sustainability of the recovery,” Mr. Garthwaite said.

“If it continues, it’s going to make it more difficult for [the Democrats] to challenge President Bush next year,” he said.


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